One big question people often ask when they’re considering bankruptcy is if they can keep their house and car after they file. In truth, it depends on how you file. Before you can find out for sure, you will need to meet with a bankruptcy lawyer to discuss your personal situation.
This guide discusses several questions the attorney will discuss with you, and the factors that influence whether or not you’ll be able to keep your home and car.
Are You Behind on Your Payments?
When you sit down and discuss your situation with a bankruptcy attorney, you might initially ask if you can keep your house and car. To answer this question, your lawyer will ask you if you are behind on your payments.
If you are not behind on these payments, you have a better chance of keeping your assets after you declare bankruptcy if you do not have past-due balances on the accounts. However, whenever you declare bankruptcy you can still lose assets, it just depends on the amount of equity in them.
If you have past-due balances on your car or house, or if you have a repossession or foreclosure in the process, the best way to protect these assets is by filing for Chapter 13bankruptcy. With Chapter 13, the court issues an automatic stay, which is an order that stops lenders from pursuing foreclosures and repossessions.
Do You Have a Lot of Equity in These Assets?
Another factor is the amount of equity you have in your home and car. Equity refers to the difference between an asset's value and the amount you still owe on it.
When a person is caught up on their car payments but has thousands of dollars of equity in the car, he or she could lose the car in bankruptcy if the person uses Chapter 7. In Chapter 7, the court seizes things they can sell to make a profit. They do this to pay for debts that bankruptcy forgives.
In Chapter 13, you are allowed to keep all your property primarily because Chapter 13 requires repayment of debt. Therefore, in Chapter 13, the equity you have in your car and house do not matter as much. Chapter 13 places you on a plan to repay your debt, and it offers you time to do this. Typically, you will get five years to repay debts, even if you have past-due balances on the debts.
What Other Debts Do You Have?
Talking about your other debts is also important when meeting with a bankruptcy lawyer. Every situation is different and unique in its own way, and there isn’t a one-size-fits-all answer when someone is considering bankruptcy.
It is also important to note that there are different types of debt. For example, some debts are never dischargeable, these include debts such as alimony and child support, student loans, court fines and taxes.
Another type of debt is unsecured debts such as medical bills, personal loans and credit card bills. Bankruptcy treats unsecured debts differently and Chapter 7 allows forgiveness of these types of debts.
You will need to have a lawyer look at your entire situation to find the option best for you, and if saving your house from foreclosure is the most important aspect of your case, your lawyer will suggest using Chapter 13 bankruptcy so you can keep your home.
After discussing these questions with a bankruptcy lawyer, he or she will tell you if you can keep the assets you own and which branch of bankruptcy you should use. Contact the experts McMaster Law Firm, LLC today to learn more about your options and how each branch of bankruptcy will affect you.